2018 (5) TMI 1134 - AT - Service Tax

Classification of services - distinction between renting and hiring - Appellants M/s Buthello Travels and M/s Buthello & Sons provided buses to the various Municipal Transport corporations for operating as Stage Carriage for transportation of Public - whether taxable under Rent A cab Scheme Operator Service or otherwise? - Held that - in the present case the Appellants were giving buses on hire to the corporations. They were not renting the cabs to the corporation. The control and the possession of the buses remained with the Appellant. Hon ble High Court of Uttarakhand in case of CCE Vs. Sachin Mehrotra 2014 (10) TMI 816 - UTTARAKHAND HIGH COURT while differentiating between renting and hiring reached to the conclusion that unless the control of the vehicle is made over to the hirer and he is given possession for howsoever short a period, which the contract contemplates, to deal with the vehicle, no doubt subject to other terms of the contract, there would be no renting . In the present case, the control and possession of the vehicle has remained under the control of the Appellant. Apparently the Appellant is required to bear the cost of running the buses so hired, including the salary to be paid to the drivers and they are remunerated on the basis of kilometer run only - the possession and control of the vehicle has remained with the Appellant and hence cannot be termed as renting of cab/ bus. Time Limitation - Held that - the Appellants were filing Service tax returns showing the services as exempted services. In such case when the services rendered by the Appellant were in the knowledge of the revenue and there is no reason to hold that the Appellant intended to suppress the nature of services, in that case no malafide intention can be attributed to the Appellants - extended period not invokable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the appellants.
2. Applicability of "Rent A Cab Scheme Operator Service".
3. Time-barred demand and suppression of facts.

Detailed Analysis:

1. Classification of Services Provided by the Appellants:
The appellants, M/s Buthello Travels and M/s Buthello & Sons, provided buses to various Municipal Transport corporations for public transportation, charging on a per-kilometer basis. The buses were registered as Stage Carriage with the Regional Transport Authorities. The revenue classified these services under "Rent A Cab Scheme Operator Service," leading to demands for service tax and penalties.

2. Applicability of "Rent A Cab Scheme Operator Service":
The appellants argued that their services did not fall under the "Rent A Cab Scheme" as they were not cab operators and did not rent out cabs. They maintained control and possession of the buses, merely providing them on hire. They cited judgments from the Uttarakhand High Court (CCE Vs. Sachin Malhotra 2015 and CCE Vs. R.S. Travels 2015) to support their argument that unless control and possession of the vehicle are transferred to the hirer, it cannot be considered renting.

The tribunal agreed with the appellants, referencing the Uttarakhand High Court's decision, which differentiated between renting and hiring. The court emphasized that renting involves transferring control and possession to the hirer, which was not the case here. The tribunal also cited similar decisions in Rahul Travels and P.B. Bobde, reinforcing that the appellants' services did not qualify as "Rent A Cab."

3. Time-Barred Demand and Suppression of Facts:
The appellants contended that the demand for the extended period was time-barred, as there was no suppression of facts. They argued that the revenue was aware of their activities from the beginning, as earlier proceedings had categorized their services under "Tour Operator Services." The tribunal found merit in this argument, noting that the appellants had been paying VAT under the belief that their services constituted a deemed sale and were exempt from service tax. The tribunal held that there was no malafide intention or suppression of facts by the appellants, citing Supreme Court judgments in Nizam Sugar Factory and Caprihans India Ltd. to support their conclusion.

Conclusion:
The tribunal concluded that the services provided by the appellants did not fall under the "Rent A Cab Scheme Operator Service" category. Additionally, the demand for the extended period was deemed time-barred due to the absence of suppression of facts. Consequently, the impugned order was set aside, and the appeals were allowed.